The Real Winner in the Anthropic IPO Isn’t Anthropic, OpenAI, or Even Google.

As the big wave of mega AI IPOs moves in, the retail crowd is probably eager to punch their ticket. Though it’s tough to tell where valuations will end on day one for the likes of Anthropic, OpenAI, and SpaceX, one thing is almost a guarantee: the trading activity is going to be wild.

For the many value investors who will be enjoying the first few days, weeks, or even months and quarters from the sidelines, there are more compelling, cheaper, under-the-radar ways to play the rise of the AI innovators at the frontier.

Amazon’s Anthropic bet pays off big-time

Enter Amazon (NASDAQ:AMZN | AMZN Price Prediction), which has been steadily increasing its exposure to Anthropic over time. Its early investment has won big, but the real story is how the investment and partnership have evolved.

With Amazon recently helping itself to another $5 billion, with up to another $20 billion to be invested later, questions linger as to just how much Amazon stands to win if the Anthropic IPO comes in hot, perhaps hotter than expected, following its recent private valuation surge.

Could we be looking at a $1 trillion valuation for Anthropic shortly after it IPOs? It’d be a stretch, but, you know what?

I certainly wouldn’t rule it out. Any way you look at it, Amazon’s skin in the game might still be underestimated by the many investors who would rather bet on the AI IPOs to come, rather than gaining indirect exposure through a Magnificent Seven member standing in the corner of a big frontier AI winner.

In short, Amazon has nice paper gains from its Anthropic bet. And things could get even better once Anthropic’s IPO hits the ground running. Apart from the winning investment and the larger stake to come, though, are the ties to AWS silicon. As a part of this latest deal, Anthropic is going to be using Amazon’s AI chips on its AWS servers.

The Amazon-Anthropic deal is a massive win for both sides

Anthropic’s going to get the computing power it needs while Amazon gets a star customer to buy its Trainium chips. Given Anthropic’s notable efficiency focus, its “more far along” profitability roadmap, and how there’s going to be a huge line for Nvidia (NASDAQ:NVDA) GPUs, the deal just makes sense.

If Amazon’s silicon can deliver, it’s getting $100 billion in business over the next 10 years, and, of course, let’s not forget about the massive vote of confidence that comes with the business, especially as Anthropic stays in the front of the pack of the AI frontier for the long haul (I think it will).

In my humble opinion, Amazon’s expanded deal with Anthropic is the perfect response to the Microsoft-OpenAI deal. In some ways, it’s “bettering” that deal, given how Amazon’s custom silicon ties in and how it could act as a backdoor to nip away at Nvidia’s business.

Amazon has a nice seat at the Anthropic IPO

Any way you look at it, Amazon has set itself up very nicely as Anthropic shapes up to be one of the hottest new AI pure-play IPOs out there. After the boom and bust happen, though, questions linger as to what Amazon will do with its Anthropic winnings.

Time will tell. My guess is that it’ll depend on what happens to the valuation. It could be off the charts, in which case, it might make sense to sell to finance the AI buildout, which doesn’t appear to be slowing down anytime soon.

Perhaps the best move, at least in my opinion, is to hang on for the long haul, regardless of how the IPO goes. When it comes to such hyper-growth sensations, sometimes, it just makes sense to hang in for the ride. Also, perhaps having such skin in the game could act as the lever that helps take the AWS AI stack into overdrive.

What comes next for Amazon and its Anthropic stake?

Any way you look at it, more Anthropic exposure could pay off for Amazon, and it’s not just about the paper gains. In my view, the real risk of selling after a nice post-IPO gain is missing out on the next Mythos, whatever that may be.

If underinvesting in the AI boom is riskier than overinvesting, I see no reason why reducing a stake in an AI champ like Anthropic would be the move.

Just think about the co-design opportunities and the physical AI onramp that Anthropic could take on within the walls of Amazon’s warehouses. All considered, I think the best move would be to keep on buying.